Alcoa-Alumina Venture Cuts Output Target on Slow Demand

By Soraya Permatasari -
May 2, 2012

Alumina Ltd. (AWC), partner in the world’s
biggest producer of the material used to make aluminum, lowered
the venture’s output target for this year, expecting slowing
demand growth will keep prices “subdued.”

The venture between Alumina and Alcoa Inc. (AA) will produce
15.5 million metric tons of alumina this year, 3 percent lower
than its February estimate and down from a record 15.7 million
tons in 2011, Alumina Chief Executive Officer John Bevan told
reporters after the annual shareholder meeting today in
Melbourne. Aluminum demand will grow about 5 percent to 7
percent this year, slower than last year, he said.

United Co. Rusal, the world’s largest aluminum producer,
said last month it’s looking at the possibility of closing
smelters as prices decline. Alcoa, the largest U.S. aluminum
producer, cut 12 percent of capacity in January and Chief
Executive Officer Klaus Kleinfeld said April 11 the reductions
“may not be the end.” Aluminum has fallen 25 percent in the
past 12 months in London.

“It’s hard to see prices go up from current levels,”
Bevan said. “The weakening in aluminum pricing is largely a
reflection of slowing demand growth for the metal, in particular
in Europe. This has led to curtailments at high-cost smelters,
mainly in Europe.”

Indonesian Curbs

Indonesia’s plan to curb exports of unprocessed metal ores
may not boost prices in the short term because the policy is
unlikely to be immediately implemented on a large scale, Bevan
said. In the long term, such restrictions may open up
opportunities for the venture to start selling its bauxite
overseas, he said.

Alcoa in January announced the closure of plants in the
U.S., Spain and Italy, cutting 531,000 tons of aluminum
capacity. The company also said last month it will reduce output
of alumina by 390,000 tons.

Alumina owns 40 percent of the Alcoa World Alumina &
Chemical venture, while Alcoa holds the remaining stake. The
venture produces about one-quarter of the world’s alumina, which
is refined into aluminum. Alumina also controls 40 percent of
the Point Henry aluminum smelter in the Australian state of
Victoria.

Shutting the unprofitable Point Henry smelter is an option
under review that’s due to be completed by the end of June,
Bevan said today.